'Virtual' ag-biotech companies raise $5.8 million

San Diego-based investment firm Kapyon Ventures has raised $5.8 million for two of its agricultural biotechnology companies. The companies are developing microbial and plant technologies under the lean "virtual biotech" model that has become popular in the industry.

Algenetix, a company that's developing biofuels and other products from microbes, has raised $2 million. Investors include undisclosed funders from San Diego and Two Oceans, a Sydney, Australia-based investment firm.

ZeaKal, a developer of technologies to increase yields from soybeans and rice, has raised $3.8 million from investors led by Finistere Ventures, and including Two Oceans and the Missouri Soybean Merchandising Council.

Kapyon's concept is to leverage academic research in agricultural biotechnology, which its executives said isn't being efficiently tapped. The technology behind Algenetix and ZeaKal was discovered in New Zealand, then imported to the United States. The companies have contracted with university researchers known for their expertise in agricultural biotechnology.

Algenetix is engineering microbes to more efficiently produce oil by photosynthesis, said Jerry Caulder, a local biotech veteran and Algenetix' executive chairman. Microbes typically produce oil as a way of storing energy for lean times, such as in the winter. The trick is to get them producing at a consistent rate. The company is also researching technology to make yeast produce oil instead of alcohol.

Algenetix is developing its technology with biology professor Janet Donaldson at Mississippi State University. Donaldson was part of a research team with the U.S. Department of Agriculture to develop a food supplement for young pigs. The supplement is the bacterium Rhodococcus opacus, which provides a good energy source to help them fight off infections. The bacterium is also considered a potential source of biofuel, as up to 80 percent of its weight consists of oil.

Donaldson's contribution was "huge" to the supplement project, said study participant Ty Schmidt, an assistant professor of muscle biology/physiology at the University of Nebraska in Lincoln. "She's a molecular microbiologist, so she's been fundamental to what we've been doing over the last couple of years."

The research team's goal is to develop probiotics to help pigs, and possibly other livestock, fight off infections, Schmidt said. In case the use of antibiotics for livestock is banned, such supplements will be needed, he said.

ZeaKal's technology is being developed with the University of Missouri at the laboratories of Henry Nguyen, a soybean researcher, and Zhanyuan Zhang, who studies soybeans, corn and biofuels. Nguyen is the former director of the National Center for Soybean Biotechnology and participated in sequencing the soybean genome. Zhang helped develop soybeans that can withstand herbicides planned to kill "superweeds" resistant to the popular RoundUp herbicide.

Caulder said he got the idea for the university partnerships when he was an adviser on science issues to New Zealand.

"I was working with them, trying to figure out how to monetize all the research they were paying for," Caulder said. "We have a similar problem here in the U.S. We have great university systems that are funding lots of research with public monies, and yet they have trouble monetizing it. They're very good at discovery and basic science, but not very good at converting that into technologies."